It’s your buying and borrowing power and how lending organizations put a face to your name so to speak. Your credit score is a mathematical calculation of all the information found in your credit report and equals a 3-digit number. This number ranges between 300 and 900 with an average score being approximately 650. This number to a lending institution is equivalent to the reputation you have built amongst your friends, family and co-workers. In both situations they look at your integrity, honesty and commitment.
With the economic downturn many of us have been challenged in paying our bills on time. Building credit can be difficult, but ruining it can be done in a split second.
Having a credit history is so important and it can either make or break you depending on the habits it was built on. I believe we underestimate how much power our credit gives us. It’s the difference between purchasing the home you have always wanted and not having an option to purchase at all. It also gives you the possibility to borrow money when you are in a financial crisis or want to make that large purchase.
Credit ratings are never static they change depending on your financial situation. Typically we don’t reach out for help by calling a professional for advice before we make a decision that could lead us in a direction of jeopardizing our credit. If the call for help is made, it’s usually made once the damage has already been done. You could save yourself a lot of harm and retain your good credit history by having that consultation sooner than later.
It is a good idea to check your credit report and score once a year to make sure there has not been any identity theft. Looking into your score with two different companies will give a more accurate picture since they do not share information with each other.
You can order your credit report from Trans Union and Equifax. It will be sent to you free via mail or internet however there is a charge for the process.
If you feel your credit score is low, then look over your information and make sure your credit report reflects the truth. Try to determine the factors that are most likely having a negative effect on your score and then start to improve them. A low score can be caused by you not having a credit history, in other words no record of owing money and paying it back. A simple way to build credit history is by using a credit card.
What can you do to improve your credit score?
- Pay off your debts as fast as possible.
- Pay your bills in a timely fashion. However, your utility bills, cable, phone and electricity are not recorded in your credit report. Some companies could affect your score since they might report late payments to the credit-reporting agencies. A good example of this could be a cell phone company.
- Payment of your bills in full by the due date could be very positive for your score. If this is not possible pay at least the required minimum amount shown on your statement.
- Do not try to borrow money from various lenders in a short period of time. Filling out all those applications means that your score will be negatively affected. On a positive note, your score is not harmed when you ask for information about your personal credit report.
- Do not max out or go over credit limit on your credit card. The idea is to keep your balance well below your limit. The higher the balance, the greater the negative effect is on your credit score.
If you are having a hard time obtaining a credit card, line of credit or even a loan because you have no credit history then your best option would be a "secured credit card". This means you will have to deposit money in advance with the issuer of the credit card. The limit of credit is a percentage of your deposit. Another way to build your credit is to pay your secured credit card payments on time, and eventually you may be considered for a standard type of credit card.
Treat your credit report and score with integrity, importance and honesty. It will have your back when you need it most. Everyone has to borrow at some point in their life and when someone says yes it makes all the difference to achieve what really matters to you.
- Article by Garen Lewis
